Posted by Ambrose Evans-Pritchard (ambrose.evans-pritchard@telegraph.co.uk) on 17 Dec 2007 at 14:38
Tags: oil (http://blogs.telegraph.co.uk/business/ambrosevanspritchard/default.htm/oil), dollar (http://blogs.telegraph.co.uk/business/ambrosevanspritchard/default.htm/dollar), Saudi Arabia (http://blogs.telegraph.co.uk/business/ambrosevanspritchard/default.htm/Saudi%20Arabia), Fatwa (http://blogs.telegraph.co.uk/business/ambrosevanspritchard/default.htm/Fatwa)
To all intents and purposes, the Wahabi religious establishment of Saudi Arabia has just issued a fatwa against the US dollar. This bears watching.
http://blogs.telegraph.co.uk/VirtualContent/92686/saudioil2.jpg
Anti-dollar clerics have lobbied Ali al-Naimi, the Saudi oil minister
A message issued by 26 leading clerics (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/17/cnsaudi117.xml)warns that inflation has reached intolerable levels in the Gulf kingdom.
While it does not vilify the dollar explicitly, the apparent political aim is to undermine the country’s dollar peg.
“The rulers should seek to try to remedy this crisis in a way that would ease people’s suffering.”
“We direct this message to the rulers and officials: we remind you of Prophet Mohammad’s words that you are shepherds who are responsible for your flock,” it said.
The statement was posted across the Islamic world. The background to this has been a raging debate in Gulf religious and economic circles about the destructive effects of the sliding dollar.
Among the lead-authors is Sheikh Nasser al-Omar, known for his fatwa against US-led forces in Iraq.
He has long preached the collapse of American-led capitalism, and now sees a perfect moment to plunge the knife. We can guess that al-Qaeda Inc is thinking along the same lines.
My own hunch is that the next al-Qaeda strike will not be a symbolic blow to a great building or city, but rather a carefully-timed economic blow: either by cutting – or trying to cut - the oil jugular, or by trying to precipitate a run on the dollar.
The Gulf pegs are preventing the region from taking action to stop the oil boom spiralling out of control.
Half the Mid-East is now overheating. Property booms have reached unstable extremes in almost all the oil states. Construction has become maniacal.
CPI inflation is 5.35pc in Saudi Arabia, the highest in over ten years. It has reached 10.1pc in the United Arab Emirates and 12.2pc in Qatar.
The dollar pegs – designed to anchor the currencies – are now forcing the Petrodollar economies to import US devaluation and monetary stimulus.
What has been a simmering problem for over a year, has become untenable since the Federal Reserve began slashing interest rates.
The Gulf has roughly $3.5trn under management in wealth funds and central banks, so a dollar shift makes waves.
Qatar has already slashed the dollar holding of its future generation fund from 40pc to 98pc.
Stephen Lewis, global strategist at Insinger de Beaufort, said the Fatwa was ominous.
“The Saudi government has been the one institution in the region battling to preserve the oil link with the dollar. If these clerics are able to wear down Saudi resistance, this could breach the bulwark. The dollar would quite likely be abandoned as the chief currency for pricing oil in world markets,” he said.
If the Mid-East breaks the pegs, a chain reaction threatens to follow across Asia. China now has 6.9pc inflation. It may have to ditch its cheap yuan policy soon enough anyway, or face the sort of double digit rises that destroy regimes.
The Saudi royal family rules by a delicate compromise. Although pro-Western in military and economic alliances, it relies on the endorsement of the Wahabi clerics as a key source of legitimacy.
Reluctance to confront this menacing bloc is the main reason why Riyadh tolerated - and helped – the Bin Laden network for so long.
The statement called on the Saudis to take action to stop food price soaring to fresh highs, if necessary with subsidies on key staples.
For now, the dollar is bouncing back. Speculative flows have swung back from euros to dollars after America’s CPI inflation shock of 4.3pc released last week.
One week’s data mean nothing. As the Fed cuts rates ever further to the cushion US property crash bites, Mid-East inflation will go from bad to seriously ugly with the policies now in place.
The Saudis, Qataris, and Emirates have all said they will preserve the pegs. But fatwas tend to up the ante.

Oil is the elephant, it has been for years yet no prudent action has been taken. In the too-hard basket, not politicaly acceptable to the western govts of any stripe. Now it may get up and bite us all, make the 1930's look tame though one would hope that their would be more humanity shown than then.
But I can't see a complete collapse in the US, just a mighty shock and the eventual transfer of power to the East. That is unless the US decides to go to war with someone instead.
As for the Muslim right, (so to speak), China and India are no more sympathetic to this group than we are. Theological governments arent popular,

All kidding aside, this is all part of the plan. I will send you some Amero's to invest for me when its over.

The Bigfella

12-20-2007, 07:05 AM

I took a hit this week (few percent) - seven straight down days here.

Tylerdurden

12-20-2007, 07:13 AM

I have been wanting to stock up on portable gold and silver since it was at bottom. Unfortunately my timing sucks, 3 kids in college, broke my back and out of work for over a year and I blew through every last dime of savings. After Aturnonme's and settlement I just broke even.
I think we all have been given what the good lord wants us to have but it seems he is taking my sanity too.
I am starting my own business because I think the two big outfits near me are way over financed and have to much out on collections.
If I can scrape by I could come out on top.
Problem is, I am not sure I want to be on top of whats next.

BETTY-B

12-20-2007, 05:47 PM

All kidding aside, this is all part of the plan. I will send you some Amero's to invest for me when its over.

Plan? This is not what the US corporate world wants. Nor their security force(CIA). If the oil standard is not in US dollars, it wont be in Ameros either. And if the Middle East really stands up for their rights to their own oil fields, it wont even be Euros or Pounds. Since it seems the CIA has really lost their ability to "manage" things. Actually, if I were to guess, it would change to Euros. Nixon will be rolling when it happens for sure.